Key Points:
- FPI Netting: SEBI may allow foreign investors to net funds for same-day trades to cut costs and improve liquidity.
- Intermediary Rules: Eligibility criteria for market entities will be relaxed so that only a final winding-up order causes disqualification.
- Governance & Ease: The board is addressing internal conflicts of interest while simplifying regulations for REITs and InvITs.
India’s market regulator plans to ease fund settlement rules for foreign investors, review intermediary FPI settlement norms, and boost transparency, as its board meets Monday to improve efficiency, cut costs, and strengthen governance.
SEBI Considers Netting Rule To Cut Costs
The Securities and Exchange Board of India is meeting on Monday to consider allowing foreign portfolio investors, or FPIs, to net funds for same-day equity trades, according to a report citing people familiar with the matter.
The proposal would replace the current gross settlement system, which requires FPI settlement norms to fund each purchase separately, even if they sell securities on the same day. Under the new approach, investors could offset purchases with sale proceeds and settle only the net payable amount.
The move aims to improve operational efficiency and reduce funding costs, particularly during high-volume periods such as index rebalancing days. It also seeks to limit foreign exchange costs caused by timing gaps between inflows and outflows.
“Netting of funds can significantly lower liquidity pressure for FPIs and align India with global settlement practices,” a market participant familiar with the proposal said.
The existing system often forces FPI settlement norms to arrange additional funds for at least one extra day, increasing transaction costs. The proposed change is expected to streamline cash flows and make Indian markets more attractive to global investors.
Board Reviews Intermediary Eligibility Norms
The board is also set to review the “fit and proper person” criteria for market intermediaries, with a focus on improving clarity and fairness in regulatory assessments.
Under the proposed changes, the initiation of winding-up proceedings would no longer automatically disqualify an entity. Instead, only a final winding-up order would be considered while determining eligibility.
Regulatory experts say the shift could prevent premature penalties and ensure due process. “This change reflects a more balanced approach, where decisions are based on final outcomes rather than ongoing proceedings,” a compliance expert said.
The review is part of a broader effort to refine governance standards for intermediaries operating in India’s capital markets.
Transparency, REIT, and InvIT Reforms On Agenda
The board will also discuss a report by a high-level panel on conflict of interest and transparency within the regulator. The panel has recommended stricter disclosure requirements and a “zero-tolerance” approach to conflicts involving top officials.
In addition, proposals aimed at improving the ease of doing business for real estate investment trusts and infrastructure investment trusts are expected to be taken up. These measures seek to simplify processes and encourage greater participation in these investment vehicles.
“This meeting reflects SEBI’s continued focus on strengthening market integrity while making regulations more efficient,” an industry analyst said.
The meeting marks the fifth board session chaired by SEBI Chairman Tuhin Kanta Pandey since he assumed office in March 2025.
Decisions taken at the meeting could have wide-ranging implications for foreign investment flows, regulatory compliance, and overall market transparency in India.
